Some Impacts of Industry Clusters in Missouri

Dr. Diane Primont

Professor of Economics &

Associate Director, CEBR

email: dprimont@semo.edu

April 11, 2008

Introduction

Economists and Economic Developers often focus on causes of disparities in economic growth rates

Why? Even small differences in growth rates

can lead to ever larger disparities over time, due to compounding

Two Research Questions

1. Are disparities in economic performance among counties increasing or diminishing?

“Convergence”

2. How is this performance effected by the presence and extent of industry clusters?

“Industry Clusters”

Two Research Questions

Industry cluster a group of businesses linked by common

supply chains, labor needs, technologies, or customers

1. Are Missouri counties converging?Statistical Analysis

Conditioning the growth model on: Rurality Industry cluster specialization

Graphical evidence

Statistical Analysis: Conditioning the growth model Conditional Growth Model

Growth in real per capita income 2000-2005 depends on Real per capita income in 2000 (lnpcinc2000) Index of relative rurality (lnirr) Industry cluster specialization (specialization)

1 if county specializes in one or more industry clusters; 0 otherwise

Statistical Analysis: Conditioning the growth modelgrpcinc | Coef. Std. Err. t P>|t|

-------------------------------------------------------------

lnpcinc2000 | -.2204 .0342 -6.34 0.000

lnirr | -.0437 .0150 -2.91 0.004

specialize | .0208 .0096 2.16 0.033

constant | 2.0510 .3149 6.51 0.000

-------------------------------------------------------------R-squared = 0.3005

Adj R-squared = 0.2816

Graphical evidence of convergence

Shelby

Cape Girardeau

ReynoldsOregonSt. Louis County

Pulaski

Growth by Rurality of County

Monroe

Shelby

Scotland

Reynolds

Carter

Wayne

2. Industry Clusters in Missouri

Measuring specializationLocation QuotientSpecialization in Industries

Industry cluster bubble chartsState of MissouriNortheast and South Central MissouriSoutheast Missouri and the Bootheel

Measuring Specialization

Location Quotient Ratio of the proportion of a region’s

employment in an industry to that of the nation as a whole

LQ = (EX/ET)/(NX/NT) EX is region’s employment industry x

ET is region’s total employment

NX is national employment in industry x

NT is total national employment

Measuring Specialization

LQ = 1: the region’s activity in the industry cluster is similar to the nation as a whole.

LQ < 1: the region’s activity in the industry is unspecialized.

The greater LQ exceeds 1, the more specialized the region is in the industry cluster. In this study, a region specializes in an

industry cluster if LQ >= 1.2

Measuring Specialization

Missouri Counties 2005Frequency Distribution of Specialized Industry Clusters

by industry cluster

0

5

10

15

20

25

30

Adv

ance

d M

ater

ials

Agr

ibus

ines

s, F

ood

Pro

cess

ing

&

App

arel

& T

extil

es

Art

s, E

nter

tain

men

t,R

ecre

atio

n &

Vis

tor

Bio

med

ical

/Bio

tech

nica

l(L

ife S

cien

ces)

Bus

ines

s &

Fin

anci

alS

ervi

ces

Clu

ster

Che

mic

als

& C

hem

ical

Bas

ed P

rodu

cts

Def

ense

& S

ecur

ity

Edu

catio

n &

Kno

wle

dge

Cre

atio

n

Ene

rgy

(Fos

sil &

Ren

ewab

le)

For

est &

Woo

dP

rodu

cts

Gla

ss &

Cer

amic

s

Info

rmat

ion

Tec

hnol

ogy

& T

elec

omm

unic

atio

ns

Tra

nspo

rtat

ion

&Lo

gist

ics

MA

NU

FA

CT

UR

ING

SU

PE

RC

LUS

TE

R

Min

ing

Prin

ting

& P

ublis

hing

Fre

qu

ency

Industry Cluster Bubble Chart

Hypothetical Data

LQ in

20

05

% Chg. in LQ 2001-2005

1

0

2

10-10

Stars

EmergingTransforming

Mature

Industry Cluster Bubble Chart

Missouri's South Central Region

Industry Clusters

0

0.5

1

1.5

2

2.5

-50 0 50 100

% chg. in LQ 2001-2005

LQ

2005

Education &KnowledgeCreationEnergy

Forest &Wood Products Biomedical/

Biotechnical

Industry Cluster Bubble Chart

Missouri's Northeast RegionIndustry Clusters

0

0.4

0.8

1.2

1.6

-60 -40 -20 0 20 40 60

Percentage change in LQ 2001-2005

LQ

in

20

05 Mining

ManufacturingSupercluster

Chemicals

Forest &Wood

Glass &Ceramics

Industry Cluster Bubble Chart

Mis s ouri's S outheas t R eg ionIndus try C lus ters

0

0.4

0.8

1.2

1.6

-60 -40 -20 0 20 40 60

LQ in

200

5

P ercentage C hange in L Q 2001-2005

Transportation and Logistics

Defense & Security

Business & Financial

Forest & Wood Products

Biomedical/Biotechnical

Energy

Industry Cluster Bubble Chart

Missouri Bootheel Region Industry Clusters

0

0.5

1

1.5

2

2.5

-100 -50 0 50 100

Percentage change in LQ 2001-2005

LQ

in

20

05

Agribusiness

Transportation and Logistics

Biomedical/Biotechnical

Manufacturing Supercluster

Conclusions

Achieving high economic growth is a challenge for any county or region, but particularly for rural counties

Regions with a greater number of “star” and “emerging” industry clusters tend to grow faster May be useful to target these industries for

further development